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Last month, the U.S. Supreme Court made a decision that has important implications for telecommunications service providers by paving the way for states to collect sales or use taxes from sellers with no physical presence in the taxing state. The court declared constitutional a South Dakota law requiring out-of-state sellers to remit sales taxes on sales to South Dakota residents if the sellers exceed certain revenue or transaction thresholds.

In South Dakota v. Wayfair, Inc., the Supreme Court overturned its 1967 decision in National Bellas Hess, Incorporated v. Illinois, and its 1992 decision in Quill Corporation v. North Dakota, which had generally prohibited states from collecting sales or use taxes on sales of tangible personal property from sellers with no physical presence within the state.​The Wayfair decision does not say that out-of-state businesses must immediately pay sales or use taxes to all states with such taxes, it indicates that a lack of physical presence in a state will no longer prevent the state from requiring out-of-state businesses to remit sales and use taxes. While the decision does not necessarily mean that all telecommunications service providers now have substantial nexus with all states, these companies should re-evaluate their tax collection and payment obligations on a state-by-state basis.